AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Traders Should Prepare for Less-Dovish RBA Minutes

In my opinion, the RBA came across as a touch more optimistic when it left interest rates on hold earlier in the month. Although I expect at least one more rate cut before the end of the year, the minutes may emphasize patience, while mentioning the need for more fiscal help for the economy from the government.
James Hyerczyk
AUD/USD and NZD/USD

The Australian and New Zealand Dollars are trading mixed early Monday with the Aussie trading lower and the Kiwi higher, reversing last week’s dominant price action. Both moves are likely related to key economic reports later this week.

Aussie traders are likely squaring positions ahead of Tuesday’s release of the Minutes from its last Reserve Bank of Australia (RBA) monetary policy meeting. Kiwi traders will have a chance to react to the latest Westpac Consumer Sentiment report on Tuesday.

Thursday is a big day for both currencies. New Zealand is scheduled to release data on quarterly GDP and Australia on Employment Change and Unemployment rate.

At 07:16 GMT, the AUD/USD is trading .6874, down 0.0005 or -0.07% and the NZD/USD is at .6383, up 0.0006 or +0.10%.

Central Banks Take Center Stage

Central banks will be at the forefront this week with the release of the RBA minutes on Tuesday and Wednesday’s U.S. Federal Reserve interest rate and monetary policy decisions.

The minutes of the last RBA meeting from two weeks ago will attempt to give investors a better understanding of the central bank’s view on the sluggish economy’s immediate direction.

Less-Dovish RBA Minutes

With the AUD/USD up nearly 2% for September, the RBA could afford to be a wee bit dovish in its minutes without doing too much damage to its currency. However, in keeping with the current theme from RBA Governor Philip Lowe to “wait and see”, they are likely to lean toward the less-dovish side as central bank policymakers appear to be in no hurry to implement lower interest rates.

At its last meeting on September 3, the RBA kept its cash rate at an all-time low of 1%, expecting back-to-back policy easing in June and July to boost broader economic growth in coming quarters, though it left the door ajar for further cuts.

RBA Governor Philip Lowe acknowledged domestic consumption was the main economic uncertainty, reiterating it was “reasonable to expect” lower for longer interest rates to help boost employment growth and inflation.

“The Board will continue to monitor developments, including in the labor market, and ease monetary policy further if needed,” to support growth and inflation targets, Lowe said in a short post-meeting statement.

In my opinion, the RBA came across as a touch more optimistic when it left interest rates on hold earlier in the month. Although I expect at least one more rate cut before the end of the year, the minutes may emphasize patience, while mentioning the need for more fiscal help for the economy from the government.

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